that the information here supplied is to be used as a
guide only . For exact information please consult a lawyer or notary in
your area, and seek advise from foreigners who have been living in Bali
for some time. There are exceptions on the information here supplied,
depending on the area of Indonesia, rules in Batam and Jakarta are
different. There there are "decrees" with exemptions. In general one can
conclude that that there many unclear areas in the Indonesian law, but
it is generally safe to aquire properties.
Can a foreign person or other foreign entity legally purchase property in Indonesia?
The Indonesian government issued Law 5 of 1960 on the "Basic Regulation
Of Land in Indonesia" ("UU 5/1960"), which came into force on 24
September 1960. This law explicitly and implicitly revoked many older
laws. As a result, it can be said that UU 5/1960 established
revolutionary new rules and principles concerning rights in land. UU
5/1960 recognized and regulated several rights over land and houses,
including the: Right of Ownership (Hak Milik), Right to Cultivate (Hak
Guna Usaha), Right of Building (Hak Guna Bangunan), Right of Use (Hak
Pakai), and Right of Building Lease (Hak Sewa Atas Bangunan).
The freehold property option for foreigners.
The most used (and
unfortunately for the unwary, misused) option is to use an Indonesian
name holder for your property, with who you make contracts. These
contracts give you the right to use the property. See for more
information below. We cannot stress enough that these contracts should
be checked and double checked. No matter how friendly the people are
that offer their help, ask advice from a well know legal company in
Right of Ownership
is the most comprehensive and complete form of
individual rights over land. There is no time limit, and the holder has
the right to use the land, including the earth underneath and the water
and air above. It does not, however, include the right to obtain wealth
from resources underneath the earth. Right of Ownership may be had only
by Indonesian citizens.
The Right to Cultivate
is the right to cultivate State-owned land
or to use it for other agricultural purposes for a certain period of
time. There are two kinds of Right to Cultivate: for farming enterprises
that are smaller than 25 hectares and for enterprises that are 25
hectares or more. Government Regulation 40 of 1996 on the Right to
Cultivate, Right of Building, and Right of Use ("PP 40/1997") states
that the period for Right to Cultivate is not to exceed 35 years
initially but can be extended for another 25 years. When the extension
period expires, the Right To Cultivate shall be renewed over the same
land. The Right to Cultivate may only be owned by Indonesian citizens
and companies established under Indonesian law and domiciled in
Right of Building
is a right over land, either State-owned or
private, with which the holder may erect and possess buildings for a
certain period of time not to exceed thirty years (can be extended for
another twenty years). When the extension period expires, Right of
Building shall be renewed. There are no limitations on the size of the
holding. Right of Building may only be owned by Indonesian citizens and
companies established under Indonesian law and domiciled in Indonesia.
Right of Use
is a right over land, either State-owned or private,
which gives the holder the right to use and obtain the product of a
certain piece of land. The land to which Right of Use is applied may be
used as a building site or for agricultural purposes. PP 40/1997 states
that the initial period for Right of Use is not to exceed 25 years but
can be extended for another twenty years or even indefinitely if the
land is still in use for a certain reason. Right of Use may be owned by
Indonesian citizens, resident foreigners
, Indonesian companies
domiciled in Indonesia, and foreign companies that have a representative
office in Indonesia. Currently it is easy for foreigners in Bali to
obtain the right of use.
Right of Building Lease
is a right to lease land, either
State-owned or private, which gives the holder the right to use the land
in return for compensation. The payment could be one-time or periodical
as determined by mutual understanding between the parties. Right of
Building Lease may be owned by Indonesian citizens, resident foreigners,
Indonesian companies domiciled in Indonesia, and foreign companies that
have a representative office in Indonesia.
Property Rights of Foreigners
UU 5/1960 only allows foreigners to
obtain Right of Use or Right of Building Lease. However, UU 5/1960 only
provides very general information on how to obtain either of these
rights, the maximum time period, or the legal assurances provided. As a
result, many foreigners in Indonesia are not willing to engage in such
transactions because they do not know the regulations or feel insecure
with the regulations.
Renewal of rights
on expiry of the initial term is via an
application to the National Land Agency and is subject to payment of a
fee. An application must be submitted one year before expiry of the
term. Although the law is silent in regard to the period after the
expiry of the extended terms, the consensus is that a land right can be
extended if there has been no infringement of the conditions attached to
Pipil is land
owned by Balinese families by inheritage and never
has been formally registered with the Land Registration office. Before
aquiring this type of land it has to registered. This takes usually 4 to
What do foreigners have to do if they want to use an Indonesian nameholder?
It is best to use a well known company to arrange your contracts, and
it is not unusual to ask a second opinion about the contracts. Important
issues are inheritage and marriage. A foreigner married to an
Indonesian woman, needs to have a marriage contract f.i.
Procedures for Property Acquisition.
All transactions of land rights must be via deeds executed before a land
deed official at the local office of the Pejabat Pembuat Akta Tanah
(PPAT) where the land is located and must be registered in the regional
office of the National Land Agency. The PPATs are privately managed
offices (usually run by a notary) authorized by the National Land Agency
to handle land acquisition matters. Although there is no regulation
that contracts have to be in Indonesian language, it is recommended
having contracts and agreements always drawn up and executed in Bahasa
Indonesia (or two languages) to prevent later arguments that the local
partner did not fully understand the content.
Property Sales Tax.
When property is sold there is tax to be paid
by both the selling and the buying party. This is 5%, for each, over
the amount that is on the sales contract. Please note that the amount on
the sales contract can be different from the actual price agreed upon.
The tax has to be paid to the notary handling the transaction. Project
developers usually include all in their pricing schemes, but when
negotiating please ask how sales tax will be handled. Many a foreigner
got an unpleasant surprise after agreeing on a price and hearing of the
VAT Sales Tax.
VAT on sale is 10%
Luxury Sales Tax.
20% Tax on sale of landed houses with a building size of 400m2 or more or an installed electricity capacity above 6.600 watt.
Documents drawn up at the Notary.
There are four documents needed: Number one
describes that the foreigner gives money to the Indonesian name holder
to buy land and property and the Indonesian gives this land and
property to the foreigner to use it, out of his free will. The document
also describes that the name holder gives the foreigner permission to
sell , to rent it out or rebuild the house or property. It states that
the agreement, if necessary, passes automatically to the heirs, as well
of the foreigner as the name holders. It states that all of the property
costs (electricity, water and taxes) have to be paid by the foreigner.
The official 'Sertipikat' will be in the foreigners possession as well
as the statement of cession, signed by the name holder. Only with this
'Sertipikat Hak Milik' it is possible to sell the land. In the second document
the selling of the property is granted to the foreigner. The name holder gives his explicit permission to do so. In the third document
the name holder gives permission to rent out the house or property. The fourth document
commits the name holder to co-operate, if the time ever comes that
foreigners can own land and property in Indonesia, in making the
foreigner being the new name holder on the 'Sertipikat'. In case the law
changes in the disadvantage of foreigners, the name holder will
co-operate in changing the agreement into a lease-contract of 50 years
with option for another term.
Choose the right Indonesian Partner
to "own" your property or land. This may take some time and asking around. Talk with foreigners in your area, and don't haste.
Properties can be owned by companies
, like a PT or a PMA. A PT is
an Indonesian "Limited", a PMA is a foreign investment company which
can be owned 100% by foreigners. The PMA property license has to be
renewed every 20 or 30 years. Setting up a PT costs about 7 to 10
million rp, a PMA around 35 million rp.
Hak Pakai for foreign investors
Since March 2004 in effect in Bali:
The government offers foreign investors land rights that are relevant to
the nature of their business. Prospective buyers of land for any
purpose should consult the local government authorities on land use,
planning and zoning. Based on a Presidential Decree issued in June 1996,
foreigners domiciled in Indonesia are allowed to own one residential
property. To meet the regulations of ownership of a house or an
apartment, a foreigner must be deemed to be "beneficial to national
development" and must be either:
- An Indonesian resident (domiciled permanently in Indonesia) in possession of a permanent resident permit
- A non-resident (domiciled in Indonesia only at particular times) in
possession of appropriate visit and immigration stamps in his/her
A foreigner can purchase or construct a house
built only on land with the right of use (Hak Pakai), the right of use
with the right of proprietorship, or the right of lease (Hak Sewa). An
apartment can only be purchased by a foreigner on land with right of use
(Hak Pakai). Foreigners are not, however allowed to purchase houses or
apartments classified as "low cost housing" or "very low-cost housing".
Ownership is limited to 25 years, and can be extended for another 25
years provided that the foreigner remains an Indonesian resident or
meets the status requirements. If the foreigner departs from Indonesia,
the property must be sold or transferred within one year after
departure. If the foreigner or his family does not use the house for
more than 12 consecutive years, then the foreigner forfeits the "being
domiciled" status, for the purpose of owning residential property.